Business Technology AnalysisOvertime lawsuits

Many workers are aware of their right to receive fair pay. The Department of Labor usually provides the Fair Labor Standards Act (FLSA) promotional items to employers. Some workers start overtime lawsuits because they may feel their old job owes them extra pay after they end their employment.

According to ADP, out of all state and federal court employment class action lawsuits, 90% are hour and wage claims. Many law firms are aware of this statistic and encourage potential clients to go forward with overtime lawsuits by airing television, direct mail, and radio advertising. These clients do not have much to lose by suing employers since most companies prefer to settle cases. Also, they will not have to pay back the defense’s legal fees, unless the court decides the overtime lawsuit is frivolous.

Unfortunately, it is the burden of the company to produce solid evidence in an overtime lawsuit, or else the courts will need to rely on the employee’s documentation. If the latter happens, the courts typically side with the employee and award them the overtime pay. Also, this payoff would not be the only fee an employer would have to deal with. There are also attorney’s fees, Department of Labor fines (at least $1,100 per violation), and lost time at work to consider. The thousands or even millions of dollars lost dealing with overtime lawsuits can cause a company to shut its doors.

What are some examples of overtime lawsuits?

  • Farmers Insurance Exchange had to pay $90 million to their claims adjusters for not paying them for their long hours.
  • A police officer in Chicago sues the city for overtime pay for checking emails and answering calls from bosses on a department-issued Blackberry.
  • A class action overtime lawsuit is in motion against HP for not classifying their technicians as exempt from overtime, therefore denying them pay for all their hours worked.
  • A Verizon customer service representative filed a class-action suit against her employer by claiming they gave her an unlawful requirement to report to the call center at least 10 to 15 minutes before her shift officially started.

Most small business owners make every effort to follow the rules and treat their employees fairly. However, the people running your payroll are human and they make mistakes from time to time, especially if they work on any part of the paycheck process by paper. As a result, a worker may feel cheated out of earnings they feel are rightfully theirs. Worse, a sneaky worker will see an opportunity to make extra cash with frivolous overtime lawsuits.

How does your company make itself vulnerable to overtime lawsuits?

  • Incorrectly label employees as exempt:  According to the FLSA, businesses must pay all workers time and a half for all hours worked over 40 in a workweek. However, the law allows exceptions against overtime pay for highly paid professional, administrative, and executive employees. However, it is easy for employers to mislabel their workers as exempt if they receive a salary, therefore setting the stage for potential overtime lawsuits.
  • Label the wrong employees as independent contractors, rather than employees:  According to the IRS, if the company controls the way the worker does his/her job, reimburses for expenses, receives benefits (insurance, vacation pay), intends to continue a long-term working relationship, and works on a key feature of the business, the worker should be labeled an employee. Therefore, the worker should receive overtime.
  • Workers use a company computer from home: When an employee works away from the office, they are not under the supervision of their boss. The company would not have a way to witness if the worker is doing any overtime work.
  • Use outdated, inaccurate time-tracking processes: If your company is still using punch clocks and handwritten timesheets, your timekeeping practices are subject to error. Payroll must translate the data, calculate the hours by hand, then type it into their system. Sometimes the data is not readable; other times, payroll might enter the data into the system incorrectly.
  • Automatically deduct time for meals: This automatic task may seem easier for payroll and the worker. However, this adjustment can lead to unpaid overtime if the employee works through their mealtime.

How can you protect your business against overtime lawsuits?

Your biggest defense against overtime lawsuits is solid, time-tracked data. Your company can protect itself against overtime lawsuits by:

  • Switching to an electronic timekeeping solution: An electronic timekeeping solution can help your company record employee paid time by submitting data to payroll and a secure database. For example, ADP Time and Attendance software allow employees to punch in/out with web, mobile, touchscreen, and biometric clocks.
  • Digitize employee communication tasks: Employees should submit their scheduling, time-off requests, and availability with an electronic form. DocuSign and Formstack have form software that can complete these tasks digitally.
  • Keep company handbooks up to date: Your company should have a clear attendance policy instructing the times and methods for clocking in and out, along with the number of hours a worker should work. Each employee should review the handbook and sign letters of agreement. Also, your company should review any changes to the labor laws and update the handbooks accordingly.
  • Stay in compliance with the FLSA: Your payroll department can review the terms of the Act by taking advantage of the tools offered on its assigned United States Department of Labor page. Workforce management software, such as Kronos Workforce Central, can combine these pay rules and regulations to ensure compliance with the Act.

SwiftTech Solutions can help your company prevent overtime lawsuits by studying your payroll processes. We will help you design an attendance record-keeping plan, select time-keeping software, as well as be available 24/7 for support. For more information, you can call SwiftTech Solutions at 877-794-3811 or email for a free consultation.

ADP. Time and Attendance: Practical Steps to Help Employers Stay Ahead of Wage and Hour Litigation Trends. Retrieved from:
United States Department of Labor. Wages and Hours Worked: Minimum Wage and Overtime Pay. (2009, September). Retrieved from:
Ansari, M. For Employee Lawsuits, Trial or Settlement? (2013, February 22). Retrieved from:
Koba, M. Court Battles Heat Up: ‘I Want Overtime Pay.’ (2013, June 17). Retrieved from:
Lucci, K. Opinion: Frivolous Lawsuits a Growing Threat to Our Industry. (2013, June 28). Retrieved from:
Girion, L. Massive Award in Overtime Lawsuit. (2001, July 11). Retrieved from:
Tarm, M. Checking Work Email Outside of Work Should Count As Overtime, Lawsuit Claims. (2013, February 6). Retrieved from:
Cabraser, L. HP Technical Workers Overtime Lawsuit. Retrieved from:
United States Department of Labor. Wage and Hour Division (WHD). Retrieved from:
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